Singapore, SINGAPORE – Singapore may be the choice for companies planning initial coin offerings (ICO) and global summits, but it’s neighbor to the north, Thailand will not let Singapore’s position as the cryptocurrency capital of Southeast Asia go unchallenged. In what is likely a first for the Kingdom, the Thai government has in just a few months rolled out comprehensive and thorough regulations to govern the trade in cryptocurrencies. Earlier this year, Thailand banned ICOs while waiving its previously planned value added tax on cryptocurrency transactions. The ban and the waiver put cryptocurrencies in the uncomfortable position of not quite currency, but not quite commodity either, with the Thai Securities and Exchange Commission (SEC) defining cryptocurrencies simply as “digital assets.” With Thailand’s new regulations, the ban on ICOs has been lifted and the requirements that prospective ICOs must adhere to is relatively comprehensive and tough. According to the country’s SEC, companies looking to conduct an ICO will need to stipulate the type of digital token that they are issuing, for instance whether the planned token is a digital asset or a digital token, as well as other pertinent investor information. A digital asset will possess more “security-like” characteristics, whereas a digital token will have more utility-type characteristics.
As reported by the Bangkok Post, the Thai SEC has stipulated that ICO issuers must oversee their offerings for no less than one year and have a minimum base capital of US$156,000, with protections for retail investors. According to the SEC’s decree, institutional and ultra-high net worth investors may invest in unlimited amounts in a Thai ICO, but retail investors are not allowed to invest more than US$9,300 in any individual ICO. The move will prevent retail investors from quite literally betting the farm on an ICO. A further measure to protect retail investors is that no more than 70 percent the value of ICO tokens offered may be taken up by retain investors.
The Thai SEC has also approved seven cryptocurrencies which can be used as trading pairs for token issuances – Bitcoin, Bitcoin Cash, Ethereum, Ethereum Classic, Ripple, Litecoin, and Stellar. This means that the seven cryptocurrencies can used to trade for other cryptocurrencies and between each other. According to the SEC the seven cryptocurrencies were selected based primarily on their consensus credibility and liquidity, with other factors playing a role as well.
The Thai cryptocurrency market will also be subject to a licensing regime, with all participants requiring the Finance Ministry’s approval to conduct digital asset businesses. SEC deputy secretary general Tipsuda Thavaramara said the SEC’s regulatory scope includes ICOs, cryptocurrency exchanges, brokerage firms, dealers and other parties permitted by the Finance Ministry. The regulator expects no fewer than ten companies to apply for operating licenses, five of which it has identified as cryptocurrency exchanges and the other five being brokerages and dealers. Cryptocurrency market participants will need to apply for a license before August 14, 2018. To apply for a license, firms will need to be registered companies in Thailand and the upfront fee for cryptocurrency exchanges is US$156,000 with half that amount being the license fee for token distributions and the other half fees for cryptocurrency trading operations. Cryptocurrency brokerages can be expected to pay US$78,000 for a license and dealers will need to fork out US$62,400.
Annual fees for cryptocurrency exchanges will be 0.002 percent of trading volume, with a minimum fee of US$15,600 and a maximum of US$624,000. By way of approximation, some of the top cryptocurrency exchanges such as Binance, Huobi and OKex trade between US$1 billion and US$2 billion a day. Centralized cryptocurrency exchanges will also need to have a registered capital of US$1.56 million with decentralized exchanges only needing to have a registered capital of US$312,000. The significant difference reflects the much higher risks of hacking that a centralized cryptocurrency exchange faces versus a decentralized one.
A brokerage firm’s annual fees start at 0.001 percent of trading volume, with a minimum of US$7,800 per year rising to a maximum of US$156,000. Cryptocurrency brokers solely involved with sending trading orders will need registered capital of US$31,200 while dealers will need to have US$156,000 of registered capital. Again, the relative risk profile of the counterparties reflects their registered capital requirements.
The Thai SEC’s move to formally regulate and provide a relatively comprehensive framework for dealing with its nascent cryptocurrency market should be welcome. The speed at which the consultation with stakeholders in the industry took place and the expediency with which the Thai SEC was able to issue these new regulations should be lauded as well. The cryptocurrency markets are complex at best and although some quarters will no doubt bemoan the heavy capital requirements as well as tax burdens for cryptocurrency actors in the Thai market, it is clear from the regulations that the protection of retail investors was foremost in the minds of Thai authorities. Certainly the fallout from nearby Vietnam, where investors lost US$650.7 million to a cryptocurrency scam would no doubt have weighed heavily on the minds of Thai regulators, eager to avoid a similar situation happening within their borders. And with Thailand’s per capita GDP only US$5,900, the Thai government will no doubt prefer its at times politically restive citizens from losing their homes on cryptocurrency investments and their inherent volatility. Compared to Singapore, whose per capita GDP is ten times that of Thailand’s the cautious approach by Thai regulators is perhaps the only reasonable one.